Climate change

A few key results

Science-based target

Set to reduce our 2025 greenhouse gas emissions by 51% against a restated 2015 baseline.

$70bn environmental financing target

Financing activities planned to help address climate change and support the transition to a low carbon economy have increased to $70bn by 2025 from our previous target of $55bn.

Why is this important?

NAB recognises that climate change is a significant risk and a major challenge for the global economy and society. Financial regulators have also acknowledged climate change is a systemic financial risk which they are incorporating into supervisory frameworks.

We support the transition to a low-carbon economy, and will seek to manage our portfolio to align with the Paris Agreement goal of keeping global warming to less than two degrees Celsius, striving for 1.5 degrees Celsius above pre-industrial levels. We will review targets each year against the latest global climate scenarios and relevant technology developments.

NAB is taking a range of actions to help meet the temperature goals of the Paris Agreement, while supporting security of energy supply in Australia and New Zealand, and working with customers, related suppliers and their employees and communities in which they operate.

These measures include:

Providing a target of $70 billion of environmental finance by 2025. This increased in 2019 from our previous target of $55 billion. We are Australia’s leading arranger of project finance for Australian renewable energy and 19% of our project finance portfolio as at 30 September 2020 was for renewable energy. In addition, renewables now represent 72% of our power generation exposure.
Aligning our business with the temperature goals of the Paris Agreement: to keep global warming to less than two degrees Celsius, striving for no more than 1.5 degrees Celsius above preindustrial levels and supporting a just transition to a net zero emissions economy by 2050. We were the first Australian bank to sign the Collective Commitment to Climate Action, incorporating a range of commitments to align our business with efforts to limit global warming to well-below 2 degrees Celsius, striving for 1.5 degrees Celsius. To achieve this, we have committed to align our lending portfolio with net zero emissions by 2050.
Capping thermal coal mining exposures at 2019 levels, reducing by 50% by 2028 and intended to be effectively zero by 2035 apart from residual performance guarantees to rehabilitate existing coal assets. We now expect our thermal coal mining exposure to reduce by 50% by 2026, and to be effectively zero by 2030.
Continuing to support existing customers across the mining and energy sectors to facilitate an orderly transition to a low-carbon economy, however NAB will not finance:
- new thermal coal mining projects or new-to-bank thermal coal mining customers.
- oil/tar sands extraction projects.
- oil and gas projects within or impacting the Arctic National Wildlife Refuge area and any similar Antarctic Refuge.
- new, or material expansions of, coal-fired power generation facilities, unless there is technology in place to materially reduce emissions.
Working closely with 100 of our largest greenhouse gas emitting customers to support them in developing or improving their low carbon transition plans by 2023.
We joined the RE100 initiative in 2019 and have committed to sourcing 100% renewable electricity by 2025.

A long-standing objective of our climate change strategy has been to learn by doing and then incorporate this knowledge into how we manage environment, social and governance (ESG) risks and provide products and services to assist our customers.

Sustainability – as part of our ‘long-term’ approach – is now explicitly included in NAB’s Group Strategy. We are working to align our long-term goals with the United Nations’ Principles for Responsible Banking, the Paris Agreement and the United Nations Sustainable Development Goals where we expect to have the biggest impact. These include SDG #7 ‘Affordable and clean energy’ and SDG #13 ‘Climate action’.

Our climate change strategy focuses on the following four areas:

Leadership commitments
Developing climate change knowledge and insights
Supporting our customers through the low-carbon transition
Investing in organisational capability to identify and respond to climate change risks and opportunities.

For more details about our climate change strategy and governance refer to our Sustainability Report (PDF, 2.3 MB).

Download our Environmental Agenda (PDF, 301 KB).

Important Information

1. Data Source: Rankings based on IJGlobal League Table, MLA, Renewables, Last 12 months ending 30 September 2020, Value of Deals (database searched on 16 October 2020).

We’ve set a science-based target to reduce greenhouse gas emissions

In 2020, we restated our science-based target to reduce greenhouse gas (GHG) emissions from our operations by 51% from 2015 levels by 2025. This restatement now includes our data centres which were previously excluded and aligns with a 'Well Below 2° Scenario' under the Paris Agreement. A science-based emissions reduction target is one that is consistent with what sciences say is necessary to keep global warming below the threshold of two degrees Celsius.
Our target covers:

all direct GHG emissions (Scope 1)
indirect GHG emissions from consumption of purchased electricity, heat or steam (Scope 2) across all GHGs required in the GHG Protocol Corporate Standard. This target was restated in 2020 to:
- (i) include data centres which were previously excluded, and
- (ii) align with a well-below 2°C scenario. The target has been prepared in accordance with the Sectoral Decarbonisation Approach (SDA) ‘Services Buildings’ methodology published by the Science-Based Target Initiative.

We have adopted the Sectoral Decarbonisation Approach’s ‘Service Buildings’ methodology¹ as the most appropriate given the nature of our business operations. Our original target was submitted to the Science-Based Target Initiative for informal review, and they have confirmed that the target is considered science-based.

We have not set a target for Scope 3 (value chain) emissions, as there is currently no standard framework or agreed methodology for science-based targets for finance-related activities. We have participated in the United Nations Environment Program Finance Initiative/World Resources Institute/2^o Portfolio Carbon Initiative, which investigated the development of standardised approaches to disclosure on carbon-related risk exposure and performance for financial institutions. We welcome the opportunity to continue to participate in future developments in this area.

We report on our progress against our science-based target in our regular annual carbon reporting.

Important information:

1. The Sectoral Decarbonisation Approach (SDA) is a methodology that allows companies to set emission reduction targets in line with a 2°C decarbonisation scenario. It is based on the 2°C scenario (2DS) developed by the International Energy Agency (IEA) as part of its publication, Energy Technology Perspectives.

We’ve made a number of commitments to help address climate change and support the transition to a low carbon economy

Climate change is a significant risk and complex challenge requiring action at all levels – local, state, national and international - and by all stakeholders.

We believe the financial sector has an important role to play in assisting the transition to a low-carbon economy, through the energy we purchase directly and financing. This transition needs to be considered and balanced, supported by a stable policy environment that provides investment certainty over time.

Our commitments

NAB has adopted three “We Mean Business” Coalition climate change commitments¹ to recognise the role we can play in supporting the transition to a low carbon economy that limits global warming to less than 2°C. We’ve made further commitments that show our intention to keep taking a leadership role, through how we source energy for our operations and support our customers through financing activities.

1. Undertake financing activities of AUD $70 billion over the ten years to September 2025 to help address climate change and support the transition to a low carbon economy

We’ve made an environmental finance commitment of $70 billion by 2025 which includes:

$35 billion to support green infrastructure, capital markets and asset finance
$35 billion in new mortgage lending flow for 6 Star residential housing in Australia.

Our environmental financing activity includes:

lending for green commercial buildings
specialised lending including corporate and securitisation finance for projects that reduce emissions and assist with climate change adaptation, and lending to other low carbon businesses
asset finance
green term deposits
green bonds funding
advisory activities, underwriting or arranging
lending for 6 Star Residential properties

Environmental finance by lending category
Environmental finance by lending category	2016	2017	2018	2019	2020	Total ($bn)^*
Lending for green commercial buildings	2016 0.2	2017 0.0	2018 0.0	2019 0.5	2020 0.5	Total ($bn)^* 1.2
Specialised lending, corporate and securitisation lending	2016 0.7	2017 1.6	2018 2.3	2019 2.6	2020 3.1	Total ($bn)^* 10.3
Asset finance	2016 0.1	2017 0.0	2018 0.2	2019 0.0	2020 0.0	Total ($bn)^* 0.3
Green term deposits	2016 0.0	2017 0.0	2018 0.0	2019 0.4	2020 0.0	Total ($bn)^* 0.4
Green bonds	2016 0.4	2017 1.8	2018 2.7	2019 0.0	2020 0.0	Total ($bn)^* 4.8
Advisory, activities, underwriting and arranging	2016 0.0	2017 0.2	2018 0.3	2019 3.6	2020 2.0	Total ($bn)^* 6.1
Lending to support 6-Star residential property development	2016 5.7	2017 2.8	2018 4.0	2019 3.6	2020 3.3	Total ($bn)^* 19.4
Progress towards $70bn target	2016 7.1	2017 6.3	2018 9.5	2019 10.7	2020 8.9	Total ($bn)^* 42.5

* Represents total cumulative flow of new environmental financing from 1 October 2015.

Further information on how we calculate our environmental financing is outlined by category in our Environmental Financing Methodology (PDF, 329KB).

For more details about our environmental financing refer to our Environmental Products and Services, our Sustainability Data Pack (XLSX, 865KB) and our Sustainability Report (PDF, 2.3MB).

2. Source 100% of our Australian electricity requirements from renewable energy sources by 2025

We joined the RE100 initiative in 2019 and have committed to sourcing 100% of our Group electricity from renewable sources by 2025.

Minimising the environmental impact of our business is a key focus of ours. In 2010, we became the first Australian bank to achieve Climate Active (then National Carbon Offset Standard) certified carbon neutrality and in 2020, we celebrated 10 years of carbon neutrality. We maintain this through an on-going focus on energy efficiency and other carbon reduction initiatives including:

reducing the amount of energy we used by our equipment, lighting, heating and cooling
installing solar panels on branches
switching from brown coal-fired grid electricity to tri-generation and co-generation at two key sites
purchasing offsets to neutralise remaining emissions.

Sourcing 100% of the electricity we need from renewable energy sources will continue to reduce our carbon emissions and help scale-up Australian-based low-emissions infrastructure and renewable energy generation.

3. Engage responsibly on climate policy

We will continue to engage in dialogue with key stakeholders, including customers and the wider community, to help inform how we advocate on climate policy with all levels of government. We will also ensure that our engagement on climate policy is co-ordinated and consistent and we will communicate our position, actions and outcomes annually through our CDP climate change survey response and annual report suite of documents.

4. Report climate change information through mainstream reporting channels and increase our carbon risk disclosure in half and full-year results and annual reporting, incorporating stakeholder input

Consistent with our commitment to transparency and integrated reporting, we are committed to identifying, developing and implementing ways to improve disclosure on carbon risk exposure through collaboration with other financial institutions, both in Australia and internationally. We have publicly reported on our GHG emissions since 2003. We are aligning our GHG reporting with internationally recognised climate change reporting frameworks, such as the Climate Disclosure Standards Board’s Climate Change Reporting Framework and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We continue to incorporate disclosure of relevant climate change related information in NAB’s Annual Financial Report and have included carbon-related disclosures in our Half and Full Year Investor Presentations since May 2015.

5. Commit to putting a price on carbon and align to the UN Global Compact’s business leadership criteria on carbon pricing

We first established an internal carbon price in 2010, as part of our commitment to achieve and maintain carbon neutrality. This has helped to drive investment in energy efficiency initiatives and helps us to achieve GHG reduction targets. We will continue to maintain the use of an internal carbon price and publicly communicate our understanding of how market mechanisms can help achieve GHG reductions. NAB will also continue to disclose, in our annual CDP climate change survey response and other relevant corporate publications, how we use our internal carbon price.

6. Set a science-based GHG emission reduction target for our operations

In 2020, we achieved an 41% reduction in emissions against our science-based emissions reduction target to reduce GHG emissions by 51% by 30 June 2025 from a 2015 baseline.

7. Commit to transparency and integrated reporting which means we are working to identify, develop and implement new ways to deliver on our commitment to carbon risk disclosure

We continue to respond to the CDP Climate Change Survey and have maintained our Climate Active Certification in Australia.

In 2019, we signed up to the UN Principles for Responsible Banking.

We will also undertake further transition risk scenario analysis on coal-related sectors which will help us map transition pathways for coal-related sectors.

8. Collective Commitment to Climate Action

NAB joined the Principles for Responsible Banking Collective Commitment to Climate Action (CCCA) in September 2019. The CCA commits NAB Group to aligning its lending portfolio to net zero carbon emissions by 2050. This will involve NAB: (a) setting targets to align our lending exposures to support the low carbon transition and the Paris Agreement and (b) developing sector-specific plans to support our clients in accelerating the low carbon transition.

As part of our actions to meet our CCCA commitment, NAB has commissioned ClimateWorks Australia to apply sector-based analysis under 2˚C and 1.5˚C scenarios to understand possible transition pathways our customers can take to a net zero emissions 2050 and the actions they may be able to undertake to get there. NAB will work closely with 100 of our largest greenhouse gas emitting customers to support them in developing or improving their low carbon transition plans by 2023.

Important information:

1. Commitments 3, 4 and 5 adopt three of the CDP (formerly the Carbon Disclosure Project)-led “We Mean Business” Coalition global climate change commitments.

We’re Australia’s first carbon neutral bank

In 2010, we became the first Australian owned bank to achieve carbon neutrality under the Climate Active (then National Carbon Offset Standard (NCOS) Carbon Neutral Program. In 2020 we celebrated 10 years of carbon neutrality. We achieved this through a concentrated focus on energy efficiency, the use of cleaner energy sources, and the purchasing and retirement of offsets to neutralise remaining emissions.

We define carbon neutrality as a process involving five steps:

Defining and measuring our carbon (greenhouse gas) inventory.
Reducing our greenhouse gas emissions through energy efficiency, demand management (employee behavioural change) and transitioning to lower emissions energy sources, where it’s practicable.
Avoiding emissions through the purchase of renewable energy (where we choose to use renewable energy to support our strategy of investing in local emissions abatement).
Offsetting remaining emissions through the purchase of quality carbon offsets.
Verifying and reporting on our progress by:

regularly assessing our carbon neutrality and reduction targets
obtaining annual external verification and assurance of our carbon accounts (inventory and offsets) and carbon neutral commitment
reporting regularly to key internal stakeholders and annually to external stakeholders in our Sustainability Report (PDF, 2.3MB).

We lead by example

Maintaining our carbon neutral status is an important part of our strategy to reduce our climate change impact. It also illustrates our commitment to 'lead by example' in the delivery of our Environmental Agenda.

We've been operating on a carbon neutral basis (meaning our net emissions of greenhouse gas from our global operations – as defined in our carbon inventory - have been zero) since 1 July 2010.

How we calculate our carbon emissions

Our carbon inventory includes greenhouse gas emission sources from operations in Australia, Asia, New Zealand, the United Kingdom and the United States. We currently exclude an immaterial source of emissions from a small subsidiary in Canada.

Work on our carbon inventory is ongoing. For some emissions sources, it’s difficult to get access to the activity data needed for accurate greenhouse gas calculations. However, we can provide a picture of the items in our inventory that have been calculated for each of our businesses.

Download our emissions sources report (PDF 304KB).

Scope 1 and 2 emissions

The boundaries for Scope 1 and 2 emissions have been determined using an operational control approach. More specifically, in Australia and the UK, the boundary requirements for most Scope 1 and 2 emissions are covered by the regulatory requirements of the National Greenhouse and Energy Reporting Act 2007 (Cth) (Australia) and the Carbon Reduction Commitment Energy Efficiency Scheme (UK).

Using these regulatory reporting requirements to define our Scope 1 and 2 emissions and boundaries for reporting helps support us to meet our compliance obligations and ensures we are aligned with our regulatory reporting requirements.

Download details about our methodology and emissions factors (PDF 146KB).

Scope 3 emissions

For Scope 3 emissions, we’ve used an operational control approach and developed principles and criteria - outlined in our Group Environmental Reporting and Offset Management Polic (PDF, 97KB) – to define the emissions sources included in our carbon inventory.

A summary of the key methodologies, assumptions and emissions factors applicable to each emission source reported by our businesses are provided below.

Financed emissions estimate

In 2020, we estimated the Scope 3 GHG emissions attributable to NAB in Australia, as they relate to our lending to the agricultural, residential mortgages, commercial real estate (office and retail), power generation and resources (including coal, oil and gas) sectors. We sought independent assurance over the methodology and analysis applied.

Download details about our financed emissions estimate methodology (PDF, 791KB).

Reporting Library

Our approach to offsetting

Our Group Environment Reporting and Offset Management Policy (PDF, 97KB) helps us make sure that we purchase offsets that are real, quantifiable, additional and permanent. Each year, we also ensure sufficient offsets are retired to neutralise our carbon emissions.

The total portfolio of offsets purchased and retired to date includes offsets issued under the Australian Emissions Reduction Fund, the Gold Standard, the Verified Carbon Standard, the New Zealand Emissions Trading Scheme and the Clean Development Mechanism.

Our purchased offsets have come from over 40 separate projects to date including:

savanna burning projects in Australia;
forestry projects in Australia, New Zealand and Papua New Guinea;
solar projects in China, Taiwan and India;
wind farm projects in China and India;
a rice husk power plant in Thailand;
fuel switch projects in Brazil, Thailand, China and India - generating industrial heat from renewable biomass instead of fossil fuel;
a Thai biogas utilisation project that replaces oil usage with methane from waste water;
run of river hydro power projects in China, New Zealand and India; and
upgrades to geothermal plants in Turkey and Indonesia.

When purchasing our offsets, we look for opportunities that deliver not only accredited and verified emissions reductions, but also provide health, education and additional social and environmental benefits and infrastructure for local communities in the areas in which the offset projects are delivered.

Forward purchasing offset model

We use a forward purchasing model to meet our carbon neutral commitment. This type of model calculates forecast carbon emissions for the forthcoming year using the actual carbon emissions reported in the prior year's audited carbon inventory.